In In re Appraisal of PetSmart, one of Delaware’s largest appraisal litigations in history, the Delaware Court of Chancery held that the deal price in PetSmart Inc.’s going-private transaction was the best evidence of fair value. This decision, along with the Court of Chancery’s recent decision in In re Appraisal of SWS Group, where the court held that fair value was less than the deal price, will likely bring joy to deal lawyers across the country while confounding the plaintiffs bar.
In PetSmart, Vice Chancellor Joseph R. Slights III was faced with petitioners seeking appraisal from a private equity acquirer’s acquisition of PetSmart, which cashed the public stockholders out for $83 per share. PetSmart’s merger with BC Partners came after the company analyzed its strategic alternatives and ran a sale process that included contact with 27 potential bidders. BC Partners made the best “final” offer to acquire the company, originally at $82.50 per share, but was subsequently increased to $83 per share. The merger closed in March 2015. The petitioners declined the merger consideration, instead opting to pursue their appraisal rights. During a four-day trial, petitioners submitted their discounted cash flow analysis which stated that fair value of the company was $128.78 per share. That represented a total acquisition cost of $4.5 billion and was approximately 45 percent greater than the merger price. In contrast, the company contended that the deal price was the best evidence of fair value.
